AUD/USD Forex Technical Analysis – Testing Short-Term Retracement Zone at .7056 to .7002

The Australian Dollar fell on Friday with the stronger-than-expected U.S. inflation data knocking investors’ risk appetite.

Hotter-than-expected U.S. inflation data spooked U.S. stock market investors, helping the major indexes post their biggest weekly declines since late January. The sell-off was a sign that risk was off, bringing out the sellers in the higher risk, higher-yielding Aussie Dollar.

On Friday, the AUD/USD settled at .7045, down 0.0052 or -0.73%.

The sell-off comes ahead of a highly anticipated Federal Reserve meeting this week, with the central bank expected to announce at least a half-point rate hike on Wednesday.

The Fed has already raised rates twice this year, with 50-basis point rate hikes expected in June and July. Friday’s CPI report shows inflation is not peaking, so now traders are pricing in a more hawkish Fed, making the U.S. Dollar more attractive than the Australian Dollar.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through .7283 will signal a resumption of the uptrend. A move through .6829 will change the main trend to down.

The minor trend is down. This is controlling the momentum. The selling pressure is likely to get stronger if the minor bottom at .7035 fails as support. A trade through .7246 will change the minor trend to up.

The short-term range is .6829 to .7283. The AUD/USD closed inside its retracement zone at .7056 to .7002.

On the upside, the nearest resistance is a 50% level at .7144, followed by a Fibonacci level at .7218.

Daily Swing Chart Technical Forecast

Trader reaction to .7056 will determine the direction of the AUD/USD early Monday.

Bearish Scenario

A sustained move under .7056 will indicate the presence of sellers. Taking out the minor bottom at .7035 will indicate the selling is getting stronger with .7002 the next target.

A trade through the Fibonacci level at .7002 could trigger an acceleration to the downside with the May 12 main bottom at .6829 the next major target.

Bullish Scenario

A sustained move over .7056 will signal the presence of buyers. If this creates enough upside momentum then look for a possible surge into .7144.